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In October, the financial and risk business of Thomson Reuters became known as Refinitiv. The new unit, formed after a $20 billion majority buyout by a consortium led by private equity firm Blackstone, includes all of the company’s FX trading platforms and data, among other business lines.

The deal was announced in January and closed in October, officially ringing in the change of brand. Since then, there have been reports to suggest FXall, the asset manager mainstay acquired by Thomson Reuters in 2012, is up for sale.

So far, this has not been confirmed, although in February, Jill Sigelbaum, a former head of FX at Traiana, was appointed to lead FXall. The hire marked the first time since the acquisition that the multi-dealer venue had a stand-alone chief.

FXall is a multi-bank portal for institutional clients to trade with their banks, with 1,700 buy-side clients and 160 liquidity providers. Across all of the trading venues, Refinitiv captures some $400 billion a day in FX volumes on average.

Much of this growth has come from forwards and emerging markets, where electronification has only recently gained momentum. But, aside from market structure trends, the underlying macroeconomic environment, which has seen a move towards policy normalisation at major central banks, is driving activity in both forwards and emerging market currencies.

“We’ve seen an increase in forwards trading in the past year, on both Matching and FXall. Mifid II has been a trigger across the market for more forwards trading to go electronic – counterparties are looking for the increased transparency that electronic trading provides,” says Neill Penney, co-head of trading at Refinitiv.

Refinitiv has been voted the winner of two categories at the 2018 FX Week Best Banks Awards, topping the Best Broker for Forward FX and Best Broker for Emerging Markets FX rankings.

“We see all customer types increasing their use of forwards trading electronically,” Penney says.

As better market data becomes available, it becomes easier for smaller participants to participate on an equal footing

Neill Penney, Refinitiv

Penney is confident that the proliferation of FX forwards trading is bound to increase further, not least because of the diverging interest rates set by major central banks. More importantly, he points out that with greater electronification of the FX market, more data will become available to trade the different points on the forwards curve. The number of data points will also increase when Mifid II’s pre-trade transparency requirements eventually come into force.

“Mifid II pre-trade transparency will give a further push to electronic trading of forwards,” says Penney.

Prior to the coming into force of Mifid II in January, Refinitiv set up a multilateral trading facility for its forwards-matching platform. Despite the Europe-centric nature of the regulation, the broker opted to establish a central limit order book for EU and non-EU currency pairs to cater for all of its customers globally.

“The strategy of putting everything on one regulated MTF has worked,” says Penney. “Volumes for our forwards-matching platform have increased throughout the year.”

Electronic equals democratic

Moreover, he believes that as the FX forwards market becomes more electronic, so will it become more democratic.

The availability of more market data will increase the number of market-makers and enhance liquidity provision as a result.

“As better market data becomes available, it becomes easier for smaller participants to participate on an equal footing,” says Penney. “I think we will see a significant democratisation of the forwards market.”

“Buy-side market-makers will enter the forwards market with stronger ambition than they’ve done because more data is available, and with electronic trading they can enter and exit positions more fluidly,” he adds.

Credit and clearing will increasingly come to the fore, particularly for tenors further along the curve.

Refinitiv is working with its clients to provide electronic APIs that will allow credit matching on its forwards-matching platform to become more closely aligned with the approach used in the spot market.

“This will increase the level of anonymity pre-trade and all the benefits that brings for that type of trading,” says Penney.

However, Penney clarifies that as part of Refinitiv’s open-platform methodology and ambition to create effective solutions for its clients, the firm is open to partnering with the credit-management or clearing utilities its clients wish to use.

“I don’t think it’s a battle of credit versus clearing and therefore which is going to win,” says Penney. “There is room for both in the market. Credit is a more natural solution for short tenors and clearing for longer tenors.”

“I think we’ll see both sides of the market evolve and we’ll find the right cut-off point as new solutions are developed,” he adds.